Recent Health Care Facts and Fallacies

Those who support more government involvement in health care reform misunderstand the relationship between the American health care market and the realities of a true free market. For example, in his New York Times blog, Paul Krugman posted a piece called "Why markets can't cure health care," in which he said, "Insurers try to deny as many claims as possible, and ... try to avoid covering people who are actually likely to need care."

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The implication is that insurance companies care only about profits, not about "people," and so the government must take a far greater role in the regulating every aspect of the health care market.

Actually, Krugman is correct that insurers care mostly about their own bottom lines — that is the fiduciary responsibility of any company — but does he really believe that government bureaucracies unmotivated by the pursuit of profit care anymore about individuals? Does he really think the clerks at the U.S. Post Office or agents at the IRS have more "feeling" for the people they deal with than the people working at Aetna or Cigna? 

To put it another way, does Krugman believe that some factor makes individuals evil when they step into the profit-seeking world — wealthy New York Times columnists excepted, of course — and benevolent when they enter the political/bureaucratic one?

In fact, one might say that profit-seeking insurers and health care providers are "elected" just as much as are politicians - one group with your choices in the voting booth and the other with your choices in the market. The difference is that you, or at least your employer, can "fire" a bad insurance company much more easily than voters can fire a bad politician. And of course heartless bureaucrats are eternal.

In the view of Krugman and others who support statism, because they seek profits health insurers are bad. This makes him and them blind to the countless examples of how the pursuit of profit in a free and competitive marketplace provides better service than the alleged goodwill of government officials.

Of course, American health care is hardly a free and competitive market. The government controls 50 percent of health care spending in the United States (and rising), up from 10 percent in the 1960s. Medicare imposes price controls and only pays on a "fee for service" basis, destroying the incentives to innovate in ways that would generate real increases in value.

Moreover, tax policy that allows employers -  but not individuals — to deduct health care expenses has led to a third-party payer system that skews incentives for both consumers and providers, preventing the former from being good, frugal shoppers, and the latter from becoming more efficient and innovative. This government policy also makes insurers less responsive to consumers, which wouldn't be the case if you rather than your employer could "fire" your insurance company.

Giving government yet more control over the health care market will only increase these dysfunctions, leading to government-controlled rationing and lower quality care. Universal health coverage has been a disaster, and an expensive one at that, in the two states that have attempted to provide it. President Obama cites Massachusetts as his model, yet a study found that they were the slowest payer of health claims to doctors, taking 56 days compared to 22.6 for private insurers, and had the highest denial rate of care. Hawaii's experiment also turned out to be a failure.

Government involvement in health care has been growing for decades, and is at the root of most of the present system's dysfunctions. Giving it a larger role as a means of correcting those dysfunctions is the exact opposite of what we should be doing.


Jarrett Skorup is a 2009 graduate of Grove City College with a dual major in history and political science. He is a research intern at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.